Capital subsidy does not reduce actual cost for depreciation under income-tax law; assessee's claim upheld.

Capital subsidy received under a Government scheme was not required to be deducted from the actual cost of plant and machinery for depreciation purposes under section 43(1) of the Income-tax Act, 1961. The Court followed its earlier decision on the same point and found no reason to depart from that view. The subsidy was treated as not reducing the cost of the assets for computing depreciation, so the issue was answered in favour of the assessee.

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Issues: Whether capital subsidy received by the assessee was liable to reduce the actual cost of plant and machinery for the purpose of depreciation under section 43(1) of the Income-tax Act, 1961.

Analysis: The question was covered by an earlier decision of the Court, and no reason was found to depart from that view. The capital subsidy received from the Government scheme was held not to be a reduction from the cost of the assets while computing depreciation.

Conclusion: The amount of capital subsidy received by the assessee did not reduce the cost of the assets for allowing depreciation, and the question was answered in favour of the assessee.

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